Monday, March 02, 2009

AIG Argh

I am a little distressed about the size of the stake that the government's taken in AIG.

From what I gather, it's motivated by an unwillingness to let them fail, which is in turn motivated by their high degree of interrelationship with other companies, and, as apparently Warren Buffet said, the high degree of interrelationships that those companies had with still others. Too Big To Fail, and all that. Its not so much the specter of socialization that bothers me as the strong feeling that we're not going to get that money back - except, perhaps, pennies on the dollar, and even then, bright people will harrumph and say that it was a good thing, and the right thing to do. Which it might be, but it's still scary. I would be willing to bet that Barack, himself,doesn't clearly understand whats going on.

Where does it end? And how soon will the next candidate pop up?

2 comments:

STAG said...

My money manager asked me to move my mutual funds out of risky vehicles, and into "Guaranteed" Investment Certificates. I asked him, how are they guaranteed? He told me that the extra premiums these vehicles charge would go to an insurance company to cover my investments so that I would never actually lose money.
Sounds good, if you are handling, say, the pension funds for your company, where failure is not an option. But I asked him, "these are "Mutual Funds". If they lose, it is because the whole freakin' market is losing. Including the Insurance Company.
The name of the Insurance Company? Um, that would be AIG.

If you don't prop up AIG, then investor confidence will be destroyed much more than it is now.

Thats MY best guess....grin!

Cerulean Bill said...

You're right about the confidence -- but I don't think it CAN get much worse. (Oh, okay, I know it could -- but thats when people start taking money out and putting it in their mattress.)

I heard the chairman of AIG, acknowledging the need for more funds, say that the money they had was paid out to their subscriber companies. He said this as if it were a good thing. I suppose it is -- objectively.

Too big to fail, too big to fail.